Tax Prep, Planning & Strategy
WCS tax experts bring your complex tax issues into plain view.
Every business, individual or industry has its own tax complexities and regulations. It’s this intersection of tax complexity and client profitability where we thrive. We bring things into clear view where clients can understand and build on the plans and strategies that ensure a strong financial structure to grow your business or your estate.
Our tax advisors specialize in the following areas:
Individual Tax
Equally as important as understanding the ever-shifting tax regulations is understanding the complexities and goals of each individual and family we work with. We create active relationships with our clients to assure that changes in regulations and changes in their lives can be captured and planning can be adjusted to maximize their income.
Business Tax
Like our lives our businesses experience a lifecycle. From starting up to expansion to transferring or selling the business. Every business and industry has unique and ever-changing tax compliance issues – and world and community events can have positive or negative effects on our success. WCS comprehensive tax planning provides a 360 degree view of how to minimize the impact taxes will have on your business.
R&D Tax Credit
Research and Development isn’t something only big corporations do. Businesses of all sizes are innovating every day – trying different approaches and methodologies to continually improve their products, processes and client services. You may be doing more R & D than you think and we can help you identify and claim R & D Tax Credits to reduce your tax liability.
Estate & Trust
The transfer of wealth from one generation to the next is a critical component to your overall financial strategy. It is a multidisciplinary approach combining the talents of your attorney and financial advisor with our estate tax professionals. Together we will develop, implement and monitor a plan to conserve and transfer wealth
Non-Profits
When it comes to non-profits we have our own mission. Our CPAs and business consultants provide strategic business planning and tax insight to develop non-profit financial systems that meets their present needs and provide a sustainable path for the future of their mission. WCS partners are not only actively involved with our non-profit clients but also served as board members supporting many local non-profits in our community.
Real Estate Tax
At WCS we work with real estate developers, homebuilders, general contractors, subcontractors, specialty trades and common interest realty associations to develop and implement powerful tax planning strategies. Each plan is built from the ground up to meet the exacting needs of your real estate business and adapt to the ever changing real estate markets.
Industry Benchmarking
Benchmarking can help you gain the competitive edge.
Benchmarking measures your performance in critical areas against industry standards (benchmarks) and with the leaders in the industry along with the competitors. This helps you get valuable insights on how different segments of the business are performing and compared to the competitors and industry leaders. WCS accountants and business advisors uncover areas for improvement and work with your team to implement the solutions and best practices that could save you money.
WCS uses the latest software to offer industry benchmarking. Data is compiled from public and private companies as well as publicly available sources throughout the North American businesses. These results can help to uncover new opportunities to best service you or set targets for your business.
Determine a reasonable salary for a corporate business owner
If you’re the owner of an incorporated business, you probably know that there’s a tax advantage to taking money out of a C corporation as compensation rather than as dividends. The reason is simple. A corporation can deduct the salaries and bonuses that it pays executives, but not its dividend payments. Therefore, if funds are withdrawn as dividends, they’re taxed twice, once to the corporation and once to the recipient. Money paid out as compensation is taxed only once, to the employee who receives it.
However, there’s a limit on how much money you can take out of the corporation this way. Under tax law, compensation can be deducted only to the extent that it’s reasonable. Any unreasonable portion isn’t deductible and, if paid to a shareholder, may be taxed as if it were a dividend. The IRS is generally more interested in unreasonable compensation payments made to someone “related” to a corporation, such as a shareholder or a member of a shareholder’s family.
How much compensation is reasonable?
There’s no simple formula. The IRS tries to determine the amount that similar companies would pay for comparable services under similar circumstances. Factors that are taken into account include:
- The duties of the employee and the amount of time it takes to perform those duties;
- The employee’s skills and achievements;
- The complexities of the business;
- The gross and net income of the business;
- The employee’s compensation history; and
- The corporation’s salary policy for all its employees.
There are some concrete steps you can take to make it more likely that the compensation you earn will be considered “reasonable,” and therefore deductible by your corporation. For example, you can:
- Use the minutes of the corporation’s board of directors to contemporaneously document the reasons for compensation paid. For example, if compensation is being increased in the current year to make up for earlier years in which it was low, be sure that the minutes reflect this. (Ideally, the minutes for the earlier years should reflect that the compensation paid then was at a reduced rate.)
- Avoid paying compensation in direct proportion to the stock owned by the corporation’s shareholders. This looks too much like a disguised dividend and will probably be treated as such by IRS.
- Keep compensation in line with what similar businesses are paying their executives (and keep whatever evidence you can get of what others are paying to support what you pay).
- If the business is profitable, be sure to pay at least some dividends. This avoids giving the impression that the corporation is trying to pay out all of its profits as compensation.
Planning ahead can help avoid problems. Contact us if you’d like to discuss this further.
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Accounting & Assurance
WCS has proven experience in a broad range of industries, including real estate, construction, non-profits, government, and employee benefit plans, to name a few.
At WCS, we offer a wide range of accounting and assurance services to meet your specific financial reporting needs driven by your management, board or investor needs, regulatory reporting requirements, or financing arrangements. Our audit and accounting professionals specialize in the following areas:
Assurance
- Audits of Financial Statements
- Reviews and Compilations of Financial Statements
- Forecasts and Projections
- Overhead Audit and Federal Acquisitions Regulations (FAR)
- Employee Benefit Plan Audits
- HUD, Uniform Guidance Audits
- Personal Financial Statements
- Special Audits
Accounting
- Budget Preparation
- Monthly Bookkeeping
- Bank Reconciliations
- Bill Paying Services
- Outsourced Accounting Services
Reasons why married couples might want to file separate tax returns
Married couples often wonder whether they should file joint or separate tax returns. The answer depends on your individual tax situation.
It generally depends on which filing status results in the lowest tax. But keep in mind that, if you and your spouse file a joint return, each of you is “jointly and severally” liable for the tax on your combined income. And you’re both equally liable for any additional tax the IRS assesses, plus interest and most penalties. This means that the IRS can come after either of you to collect the full amount.
Although there are provisions in the law that offer relief, they have limitations. Therefore, even if a joint return results in less tax, you may want to file separately if you want to only be responsible for your own tax.
In most cases, filing jointly offers the most tax savings, especially when the spouses have different income levels. Combining two incomes can bring some of it out of a higher tax bracket. For example, if one spouse has $75,000 of taxable income and the other has just $15,000, filing jointly instead of separately can save $2,512.50 for 2020.
Filing separately doesn’t mean you go back to using the “single” rates that applied before you were married. Instead, each spouse must use “married filing separately” rates. They’re less favorable than the single rates.
However, there are cases when people save tax by filing separately. For example:
One spouse has significant medical expenses. For 2019 and 2020, medical expenses are deductible only to the extent they exceed 7.5% of adjusted gross income (AGI). If a medical expense deduction is claimed on a spouse’s separate return, that spouse’s lower separate AGI, as compared to the higher joint AGI, can result in larger total deductions.
Some tax breaks are only available on a joint return. The child and dependent care credit, adoption expense credit, American Opportunity tax credit and Lifetime Learning credit are only available to married couples on joint returns. And you can’t take the credit for the elderly or the disabled if you file separately unless you and your spouse lived apart for the entire year. You also may not be able to deduct IRA contributions if you or your spouse were covered by an employer retirement plan and you file separate returns. You also can’t exclude adoption assistance payments or interest income from series EE or Series I savings bonds used for higher education expenses.
Social Security benefits may be taxed more. Benefits are tax-free if your “provisional income” (AGI with certain modifications plus half of your Social Security benefits) doesn’t exceed a “base amount.” The base amount is $32,000 on a joint return, but zero on separate return (or $25,000 if the spouses didn’t live together for the whole year).
No hard and fast rules
The decision you make on your federal tax return may affect your state or local income tax bill, so the total tax impact should be compared. There’s often no simple answer to whether a couple should file separate returns. A number of factors must be examined. We can look at your tax bill jointly and separately. Contact us to prepare your return or if you have any questions.
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Do your employees receive tips? You may be eligible for a tax credit
Are you an employer who owns a business where tipping is customary for providing food and beverages? You may qualify for a tax credit involving the Social Security and Medicare (FICA) taxes that you pay on your employees’ tip income.
How the credit works
The FICA credit applies with respect to tips that your employees receive from customers in connection with the provision of food or beverages, regardless of whether the food or beverages are for consumption on or off the premises. Although these tips are paid by customers, they’re treated for FICA tax purposes as if you paid them to your employees. Your employees are required to report their tips to you. You must withhold and remit the employee’s share of FICA taxes, and you must also pay the employer’s share of those taxes.
You claim the credit as part of the general business credit. It’s equal to the employer’s share of FICA taxes paid on tip income in excess of what’s needed to bring your employee’s wages up to $5.15 per hour. In other words, no credit is available to the extent the tip income just brings the employee up to the $5.15 per hour level, calculated monthly. If you pay each employee at least $5.15 an hour (excluding tips), you don’t have to be concerned with this calculation.
Note: A 2007 tax law froze the per-hour amount at $5.15, which was the amount of the federal minimum wage at that time. The minimum wage is now $7.25 per hour but the amount for credit computation purposes remains $5.15.
How it works
Example: A waiter works at your restaurant. He’s paid $2 an hour plus tips. During the month, he works 160 hours for $320 and receives $2,000 in cash tips which he reports to you.
The waiter’s $2 an hour rate is below the $5.15 rate by $3.15 an hour. Thus, for the 160 hours worked, he or she is below the $5.15 rate by $504 (160 times $3.15). For the waiter, therefore, the first $504 of tip income just brings him up to the minimum rate. The rest of the tip income is $1,496 ($2,000 minus $504). The waiter’s employer pays FICA taxes at the rate of 7.65% for him. Therefore, the employer’s credit is $114.44 for the month: $1,496 times 7.65%.
While the employer’s share of FICA taxes is generally deductible, the FICA taxes paid with respect to tip income used to determine the credit can’t be deducted, because that would amount to a double benefit. However, you can elect not to take the credit, in which case you can claim the deduction.
Get the credit you’re due
If your business pays FICA taxes on tip income paid to your employees, the tip tax credit may be valuable to you. Other rules may apply. Contact us if you have any questions.
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Did you get an Economic Impact Payment that was less than you expected?
Nearly everyone has heard about the Economic Impact Payments (EIPs) that the federal government is sending to help mitigate the effects of the coronavirus (COVID-19) pandemic. The IRS reports that in the first four weeks of the program, 130 million individuals received payments worth more than $200 billion.
However, some people are still waiting for a payment. And others received an EIP but it was less than what they were expecting. Here are some answers why this might have happened.
Basic amounts
If you’re under a certain adjusted gross income (AGI) threshold, you’re generally eligible for the full $1,200 ($2,400 for married couples filing jointly). In addition, if you have a “qualifying child,” you’re eligible for an additional $500.
Here are some of the reasons why you may receive less:
Your child isn’t eligible. Only children eligible for the Child Tax Credit qualify for the additional $500 per child. That means you must generally be related to the child, live with them more than half the year and provide at least half of their support. A qualifying child must be a U.S. citizen, permanent resident or other qualifying resident alien; be under the age of 17 at the end of the year for the tax return on which the IRS bases the payment; and have a Social Security number or Adoption Taxpayer Identification Number.
Note: A dependent college student doesn’t qualify for an EIP, and even if their parents may claim him or her as a dependent, the student normally won’t qualify for the additional $500.
You make too much money. You’re eligible for a full EIP if your AGI is up to: $75,000 for individuals, $112,500 for head of household filers and $150,000 for married couples filing jointly. For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$112,500/$150,000 thresholds.
You’re eligible for a reduced payment if your AGI is between: $75,000 and $99,000 for an individual; $112,500 and $136,500 for a head of household; and $150,000 and $198,000 for married couples filing jointly. Filers with income exceeding those amounts with no children aren’t eligible and won’t receive payments.
You have some debts. The EIP is offset by past-due child support. And it may be reduced by garnishments from creditors. Federal tax refunds, including EIPs, aren’t protected from garnishment by creditors under federal law once the proceeds are deposited into a bank account.
If you receive an incorrect amount
These are only a few of the reasons why an EIP might be less than you expected. If you receive an incorrect amount and you meet the criteria to receive more, you may qualify to receive an additional amount early next year when you file your 2020 federal tax return. We can evaluate your situation when we prepare your return. And if you’re still waiting for a payment, be aware that the IRS is still mailing out paper EIPs and announced that they’ll continue to go out over the next few months.
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Is your nonprofit’s tap running dry?
The novel coronavirus (COVID-19) crisis has put enormous financial stress on many not-for-profits — whether they’re temporarily shut down or actively fighting the pandemic. If cash flow has dried up, your organization may need to do more than trim expenses. Here’s how to assess your financial condition and take appropriate action.
Put your board in charge
Ask your board of directors to lead your review and retrenchment efforts. In addition to having oversight experience and financial expertise, board members have a passion for your organization and will do whatever they can to assist. They may already have employer backing for your nonprofit, and those companies may be willing to step up their financial support. Or board members may be able to tap their social networks.
The first order of business should be to review programs relative to your nonprofit’s mission. If you identify one that isn’t critical to your mission and is a drain on cash balances and staff resources, consider cutting it. Terminating a non-mission-critical program frees up funds for other initiatives or administrative necessities. If you can redirect clients to similar programs offered by other organizations, such changes can be made without a break in service.
Your board may also be able to liberate cash from your investment portfolio. Your nonprofit may have investments or idle assets that aren’t generating operating income — for example, donated real estate, collections and other nonmarketable holdings. Divesting these possessions can raise critical operating funds.
Look to your endowment
Another potential source of operating funds is your organization’s permanently restricted endowment funds. Under the Uniform Prudent Management of Institutional Funds Act (UPMIFA), you may be able to spend what was once considered the untouchable original principal (or historical balance) of funds.
Access generally is available when the donor of the original gift is silent about restrictions or hasn’t specified that UPMIFA provisions don’t apply. In some cases, an original condition or restriction may no longer be practicable or possible to achieve. Your nonprofit should consult an attorney to learn whether this is an option.
If UPMIFA provisions don’t open up a source of funds, there’s another potential route — approach the original donor. Your organization can ask the donor to lift all or some of the spending restrictions so you may use a portion of the funds for operating costs.
We can help
These are only a few possible solutions for struggling nonprofits. If you know your nonprofit is in trouble, but don’t know how to start fixing it, contact us. We can work with your board to assess your situation and determine the best way to move forward.
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Estate & Wealth Transfer Planning
Every successful business needs a detailed plan and roadmap–your personal life is no different.
You have worked hard to build a successful business or career, made good investments and built a rewarding life for your family. Now is the time to ensure that your plan includes estate planning and wealth transfer.
Our CPAs have the knowledge, insight, and experience to help you plan your estate, alongside your attorney and financial advisor. At WCS, we want to make certain that your loved ones are cared for in the best way possible and not burdened with unnecessary taxes and red tape.
Our Smart Estate Planning works to make sure the wealth you accumulated during your life continues to work toward your goals and dreams for many more years and leaves you with complete peace of mind.
Our Smart Estate Planning includes:
In many cases your accountant has a long-term and in-depth understanding of the personal and financial aspects of your life. After years of personal attention, planning, and tax returns, your CPA is familiar with your assets and debts, your dependents, and your future goals.
During the estate planning process, we can help you:
- Understand the details of estate and gift tax laws
- Gain a complete and comprehensive knowledge of estate and gift tax regulations, down to the smallest detail
- Answer your questions and construct a plan that minimizes the impact of death taxes
- File estate tax returns
Your accountant is the best source for the information required on estate tax returns, including the fair market value of all of your assets. - Determine life insurance coverage
Because of our shared insight into your finances, lifestyle, and family, we are able to work with your insurance advisor to determine the appropriate life insurance coverage you need to protect and support your family comfortably in the event of a tragedy. - Set up a gifting plan
WCS’ in-depth experience with estate taxes and gift taxes, enables us to construct a gifting program that protects your wealth and supports your loved ones. - Handle trust administration
Over the years, our goal is to become your trusted advisor and partner. Our insight and management experience can provide invaluable and fair oversight should you need a trust administrator. - Make your wealth last for generations
Filing tax forms and avoiding unneeded tax payments is just the start. We are here to protect your wealth and help you realize your financial goals. Estate planning is one of the best ways we can assist you with long-term wealth management.
Business Succession Planning
Succession planning is an essential part of your overall business plan.
Even successful businesses can fail due to the disability or sudden death of a key person. The leader had the experience, motivation, and dedication to run and grow the business. Without proper succession planning, the future of the company is left to chance. WCS works with you to make sure nothing is left to chance and to develop a plan that ensures your business thrives even if there’s a sudden change in key leadership.
A good succession plan can help:
- to transfer ownership when the time comes
- maintain your lifestyle in retirement
- provide for your heirs financially
- prepare the business to handle unexpected events
Our team of CPAs and Business Consultants will help you with the process to bring you the peace-of-mind for the business you’ve worked so hard to build. Whether it’s to exit your business, conduct a business valuation, prepare for transition, and to regularly review the buy-sell agreements.
Inspiring your corner of the world.
